The Nigerian bond sell off spurred by weaker global oil prices and a weaker naira is expected to continue next week, while investors will focus on short-term assets in Kenya rather than a re-opened Treasury bond.
NIGERIA
Yields on Nigerian bonds climbed across the board this week, driven higher by selling pressure from some offshore investors. That trend is expected to continue next week.
The naira currency has been slipping for the past three weeks, weakened by declines in global oil prices and low inflows of hard currency into Nigeria’s debt and equity markets.
Nigeria’s central bank has stepped up its support for the naira in a bid to stem its rapid depreciation.
“More investors are expected to stay out of the bond market as long as the naira continues to struggle against the dollar,” one dealer said.
Yields on the benchmark 2024 bond rose 49 basis points to 13.18 percent from 12.69 percent last week. The 2022 debt note closed at 13.23 percent compared with 12.60 percent last week, while the 2016 traded at 13 percent versus 11.70 percent.
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KENYA
Demand for a re-opened 15 year Kenyan Treasury bond on sale next week is likely to be low as banks stay out of the auction in favour of short-term assets such as Treasury bills.
The central bank wants to raise up to 15 billion shillings($166.85 million) with the bond that was initially sold in 2010.
“Banks will not have appetite because it is in the long end,” said John Njenga, a fixed-income trader at Commercial Bank of Africa.
The bond, whose yield is expected to come in at 11.50 to 12 percent, will however get some demand from pension funds, which normally go for longer-dated instruments, Njenga said.
Traders said they expected good demand for Treasury bills due to adequate liquidity in the market.
The central bank will auction 91-day, 182-day and 364-day Treasury bills worth a total 12 billion shillings.
Reuters
